Market Overview September 2023

Highlights

ETF approval is already priced in. ETFs will be approved with an estimated 80% probability within the next 12 months

Drop likely caused by speculators, scaling shorts and then dumping with leverage into illiquid books to cause liquidations and panic, rebuying lower

75% cash (as stables), 25% crypto
Our Taraxa $TARA position did a 6x, and we are exiting it fully (still bullish on it when comparing it to Kaspa $KAS, but considering the market situation, we’ll take the win and re-enter when there are more signs of liquidity in the markets)
We are thinking about parking the cash in 1 Month T-Bills at 5.5% APY while waiting for the yield curve to invert again

Unfortunately, the best bull argument is the Bitcoin liquidity above 30k (shorts and stops) that can drive the price to 40-50k when liquidated
ETF approval in October could drive short-term Bitcoin price to 40-50k. If approved, we speculate retail demand will be used to fill shorts and dump afterward
Actual Bitcoin usage (not just speculative), for example, Lightning Network or payment integration by Twitter/X
Bitcoin Halving. But careful - past halvings were followed by bull runs - this time could be different, and we’re preparing for it (we don’t think it’s a good idea to extrapolate from previous halvings)

The global recession is accelerating. Interest rates are high and inflation is high
Treasuries provide a guaranteed 5-6% for investors with no risk
Compared to 2018/2019, we don’t see as much innovation due to low VC funding and low interest
Evergreen bear arguments like Satoshi selling, energy/Internet blackouts and cyber security threats, regulatory threats
Log rainbow chart likely to fail and break to the downside, causing panic
Post-halving crisis. Miners capitulating, hash rate falling after the halving, Bitcoin security being challenged due to insufficient miner rewards
Liquidity going down (USDT+USDC market cap), no new inflows (retail becomes poorer due to inflation, regulations become stronger)
Altcoins had the opportunity to prove themselves, but very few did. Most turned out to be VCs dumping on retail with little actual innovation.
NFTs, Metaverse, and DeFi all basically failed, with very little actual usage in 2023
The 2017 rally was driven by unregulated ICOs, 2021 rally was driven by DeFi, NFTs & meme tokens, there is nothing on the horizon that might drive the next rally (possibly demand by institutional investors, but a few years down the road)

Institutions already have access to BTC products through Micro Strategy or BTC futures
Possibly just a hyped-up event (like Bitcoin ATMs were in 2018), most likely to get retail to long into market makers shorts who then dump markets after a few weeks following the approval
Once approved (just a question of time, probably 2024), it will take a long time to convince institutions to invest
It’s not that institutions are urgently waiting to buy Bitcoin, as popular news might want you to believe
Institutional interest could hypothetically drive the next rally (as retail is struggling with inflation and can’t access crypto as quickly as in 2017 or 2021 due to regulation)

An inverted yield curve has been the best predictor of recessions
An inverted yield curve is highly problematic and a sign that the recession will accelerate
While the yield curve is inverted, the best position is a cash position until the Fed drops rates again
There is no hurry to buy Gold, Bitcoin, Stocks, or any other risk assets

We don’t see a reason to allocate more into crypto as long as the yield curve is inverted
We don’t see altcoins picking up anytime soon since there is no new liquidity coming into the markets (especially no retail liquidity, which drives altcoin prices)
We observe more obvious manipulation by exchanges (liquidity hunts for shorts), especially by Binance, MEXC, OKX (likely to tap into new revenue streams at the expense of users)
Inflation is picking up again, clearly, inflation is not yet under control
Likely bearish months ahead for crypto unless the ETF gets approved (causing a relief rally)
We believe we haven’t seen capitulation yet and will see it around the halving
The Fed will likely keep rates high for the remainder of the year. Until the Fed decides to drop rates, we’re mostly on the sidelines
When the economy starts to break, the Fed will likely revert to low interest rates and money printing (that will be the time to start scaling into crypto positions again)
We believe the second part of the crypto bear market is just beginning (but we are not shorting either)
We believe Bitcoin could be intentionally crashed surrounding the halving (leveraged dumps by market makers) to cause miner & retail panic with failed post-halving expectations and a broken Bitcoin security narrative